Interim Results

About this update from Cambridge Cognition Holdings Plc

22 August 2024 Cambridge Cognition Holdings plc ("Cambridge Cognition", the "Company" or the "Group") Unaudited Interim Results for the six months ended 30 June 2024   Cambridge Cognition Holdings plc (AIM: COG), which develops and markets digital solutions to assess brain health, announces its unaudited interim results for the six-month period ended 30 June 2024 (the "period"). Financial highlights Revenue is in line with the same period in 2023, which combined with a material reduction in costs, has reduced the adjusted operating loss significantly to £0.1 million (H1 2023: loss of £2.0 million): ·      Revenue of £5.6m (H1 2023: £6.0m) ·      Gross margin increased to 80.7% (H1 2023: 78.8%) ·      R&D expense decreased 35.2% to £1.4m (H1 2023: £2.2m) ·      Total operating expenditure decreased 35.3% to £5.4m (H1 2023: £8.4m) ·      Adjusted operating loss reduced by £1.9m to £0.1m (H1 2023: loss £2.1m) ·      Raised £2.6m to support the balance sheet and business development ·      Cash balances of £3.4m at 30 June 2024 (31 December 2023 £3.2m) Operational highlights Following a challenging end to 2023 and tough trading conditions during the period, we executed two critical actions to strengthen the underlying business: ·     Increased investment in the Group's commercial capability to enable it to exploit the central nervous systems (" CNS ") clinical trials market through the combination of a clear product focus on cognitive assessments, CNS eCOA, and automated quality assurance solutions, and an expanded commercialisation team with deep sector experience and contacts.  The market is already large (estimated at $700 million in 2024) and is forecast to grow at 15% per annum from 2024 to 2029, and ·     A significant reduction of the cost base in H1 2024 has created a more agile business, which is better positioned to deliver sustainable profitability and cashflow as sales orders and revenues accelerate.  Commenting on the results, Matthew Stork, Chief Executive Officer of Cambridge Cognition, said: "I'm pleased with the progress made during the first half as major steps were taken to strengthen our operation and business. The acquisitions of Clinpal and Winterlight are delivering new and expanded solutions and our recently enhanced commercial team is generating a growing pipeline of new business opportunities.  All these actions support our core objective to ensure we close 2024 with a secure balance sheet and a strong contracted order book of business to drive sustainable profitability and cashflow."   Investor webinar Cambridge Cognition will host an online presentation and Q&A session at 16:00BST on 28 August 2024. This session is open to all existing and prospective shareholders. Those wishing to attend should email [email protected] and they will be provided with log in details. Participants will have the opportunity to submit questions during the session, but questions are welcomed in advance and may be sent to [email protected].   Enquiries:   Cambridge Cognition Holdings plc   Matthew Stork, Chief Executive Officer  Tel: 012 2381 0700  [email protected]     Panmure Liberum Limited (NOMAD and Joint Broker)   Will Goode / Freddy Crossley / Mark Rogers   Rupert Dearden    Tel: 020 7886 2968  (Corporate Finance)  (Corporate Broking)    Dowgate Capital Limited (Joint Broker)   David Poutney / Nicholas Chambers    Tel: 020 3903 7715      Hudson Sandler (Financial PR and IR)   Dan de Belder / Hattie Dreyfus    Tel: 020 7796 4133  [email protected]   The information communicated in this announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) No. 596/2014. CHIEF EXECUTIVE OFFICER'S REVIEW Business Review During 2023 and early 2024, trading conditions remained challenging globally for the pharmaceutical sector, which has been impacted by inflationary trends and high interest rates.  Following a period of several years of revenue growth, we responded by delivering two critical actions to strengthen the business: ·      increasing commercial capability with increased capacity and deeper expertise and, ·      reducing the cost base of the business without impairing short-term growth potential. Our objective is to deliver sustainable profitability (which we define as "adjusted operating profit") and sustained positive cashflow. Increased commercial capability To drive commercial performance, the Company recruited Alex Livingstone-Learmonth as Chief Commercial Officer in the first quarter.  Since his appointment he has recruited new team members with considerable experience and developed fresh contacts within the sector, increasing both the number and value of opportunities in the sales pipeline.  While contracted sales orders were modest in the first half, we expect to see an improvement as the year develops.  We are focusing our efforts on product and service areas where we have a leading and/or highly differentiated position, particularly cognitive assessments (CANTAB and Winterlight), eCOA and AQUA, enabling the delivery of a tailored solution to challenging clinical studies where we demonstrate world-class domain expertise. The recent acquisitions of Clinpal and Winterlight are contributing to the growth of the business. Combining the AQUA and Clinpal eCOA solutions with the Company's leading position in digital cognitive assessments, CANTAB, has given us a strong multi-product solution-oriented offering to meet clients' clinical development needs.  These product launches, together with the strengthening of the commercial operations, has led to a deeper pipeline of new sales opportunities.  We are confident this will show increased sales orders in the second half of 2024.  Reduced cost base The second major initiative completed during the period has been to reduce the cost base to improve operating margins and cash flow generation.  Cost savings will not impact on prospects for short-term growth or operational delivery since they have been focused on integration synergies, trimming medium and long-term R&D projects and right-sizing operational and support teams. There has been a moderate increase in spending on commercialisation and maintenance of the healthcare offering. During late 2023 we reduced the cost base by £1.5 million per annum.  In the first half of 2024 we completed a second review following integration of Clinpal and Winterlight.  This review reduced the cost base by an additional £2.0 million per annum, resulting in combined annual savings of £3.5 million per annum.    Financial results As announced previously at the time of the fundraising in May 2024 and in the trading update published in July 2024, market conditions remained challenging in H1 2024.  Revenue for the period was at a similar level to the same period in 2023. Nevertheless changes to the Company's cost base have delivered a significant positive improvement of £1.9 million at the adjusted operating profit level, with the adjusted operating loss reduced from £2.0 million in H1 2023 to £0.1 million for H1 2024. The financial results for the period can be summarised as: ·      Revenue of £5.6m (H1 2023: £6.0m) ·      Gross margin increased to 80.7% (H1 2023: 78.8%) ·      R&D expense decreased 35.2% to £1.4m (H1 2023: £2.2m) ·      Total operating expenditure decreased 35.3% to £5.4m (H1 2023: £8.4m) ·      Adjusted operating loss reduced by £1.9 million to £0.1m (H1 2023: loss £2.1m) ·      Raised £2.6m to support the balance sheet and business development ·      Cash balances of £3.4m at 30 June 2024 (31 December 2023 £3.2m) Revenue is recognised as services are delivered to clinical studies that are executed over several years.  This brings a degree of stability based on the strength of the order book and underpins future revenue generation. This contracted order book provides good visibility over revenues for the full year, which are expected to be weighted to the second half of 2024. This is in line with historic performance.  At 30 June 2024 the order book was £14.6 million (31 Dec 2024: £17.2 million), but is expected to increase in H2.  In May 2024 we raised £2.6 million by way of a placing of 6,561,057 new Ordinary Shares at 40 pence each with participation from both certain existing and new shareholders. We were delighted by the strong level of support shown for the Placing.  The funds raised enable us to grow technical and business development activities; to explore healthcare opportunities; for working capital purposes, including expansion of the commercial team; continuation of core development projects and provision of balance sheet strength. At 30 June 2024 cash balances were £3.4 million (31 December 2023: £1.9million). As announced previously, recruitment of a new CFO is progressing and we have added additional interim, senior financial resource. Further updates will be made in due course.   Outlook The changes made to the commercial team have resulted in an expanded pipeline of new business opportunities.  As a result, we have increasing confidence that this will increase the long-term value of our contracted order book and underpin future revenue generation.  We are beginning to see commercial benefits in the roll out of AQUA and the expanded eCOA product.  Both of these are generating new business opportunities.  Costs continue to be managed tightly to support the existing product portfolio and grow the business.  We are now a more agile business, better positioned to deliver profitability and cashflow as sales orders and revenue accelerate. As a result of the actions taken during the year, combined with our clear growth strategy, we expect to deliver further success and value to our stakeholders.   Matthew Stork Chief Executive Officer CONDENSED CONSOLIDATED COMPREHENSIVE INCOME STATEMENT For the six months ended 30 June 2024 6 months to 30 June 2024 6 months to 30 June 2023 Year to 31 December 2023 Unaudited Unaudited Audited Note  £'000  £'000  £'000 Revenue 4 5,603 6,039 13,515 Cost of sales (1,079) (1,281) (2,717) Gross profit 4,524 4,758 10,798 Research and development expense (1,397) (2,176) (3,847) Sales and marketing expense (1,159) (1,881) (2,983) Administrative expense (2,726) (3,408) (6,139) Non-recurring items 5 (144) (940) (1,456) Total operating expense (5,426) (8,405) (14,425) Other operating income 63 230 322 Operating loss (839) (3,417) (3,305) Adjusted operating loss (108) (2,060) (1,128) Adjusting items 1 5, 7 (731) (1,357) (2,177) Operating loss (839) (3,417) (3,305) Interest receivable 12 6 16 Finance costs (303) (6) (168) Loss before tax (1,130) (3,417) (3,457) Tax credit/(expense) 10 106 (51) Loss for the period (1,120) (3,311) (3,508)   Other comprehensive (loss)/income   Items that may be reclassified subsequently to profit or loss:   Exchange differences on translation of foreign operations (165) 41 (210) Items that may not be reclassified subsequently to profit or loss:   Fair value movements in equity investments - - 107 Total comprehensive loss for the period (1,285) (3,270) (3,611)   Loss per share (pence)   Basic 6 (3.2) (9.6) (10.1) Diluted 6 (3.2) (9.6) (10.1)   All amounts are attributable to equity holders in the parent. The above results relate to continuing operations.   1. Adjusting items comprise amortisation of acquisition related intangible assets of £276,000 (H1 2023: £282,000, 2023: £561,000), non-recurring items of £144,000 (H1 2023: £940,000, 2023: £1,456,000) and share-based payments of £311,000 (H1 2023: £135,000, 2023: £160,000). See note 5 for further details on non-recurring items and note 7 for intangible assets. Consolidated statement of financial position At 30 June 2024     At 30 June 2024 At 30 June 2023 At 31 December 2023   Unaudited Unaudited Audited      £'000  £'000  £'000 Assets     Non-current assets     Goodwill 3,575 3,682 3,653 Other intangible assets  7 3,727 4,404 4,089 Property, plant and equipment 68 177 133 Investments 156 49 156 Trade and other receivables 20 - 20 Total non-current assets 7,546 8,312 8,051 Current assets   Inventories 188 244 187 Trade and other receivables 2,655 3,698 2,417 Current tax receivable 210 138 351 Cash and cash equivalents 3,434 1,891 3,222 Total current assets 6,487 5,971 6,177 Total assets 14,033 14,283 14,228 Liabilities   Current liabilities   Trade and other payables 2,616 3,127 2,603 Deferred income on contracts with customers 6,500 10,158 7,699 Loans and borrowings 879 - 566 Current tax payable 19 - 99 Total current liabilities 10,014 13,285 10,967 Non-current liabilities   Loans and borrowings 1,475 - 1,978 Total non-current liabilities 1,475 - 1,978 Total liabilities 11,489 13,285 12,945 Equity   Share capital 8 417 349 350 Share premium 17,337 15,152 15,169 Other reserves 5,448 5,864 5,613 Own shares (71) (71) (71) Retained earnings (20,587) (20,296) (19,778) Total equity 2,544 998 1,283 Total liabilities and equity 14,033 14,283 14,228   Consolidated statement of changes in equity At 30 June 2024   Share capital Share premium Other reserve Own shares Retained earnings   Total £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2023 (audited) 312 11,151 5,823 (71) (17,120) 95 Loss for the period - - - - (3,311) (3,311) Other comprehensive income Exchange differences on translation of foreign operations - - 41 - - 41 Total comprehensive income/(loss) for the period - - 41 - (3,311) (3,270) Transactions with owners Issue of new shares in relation to business combination 34 3,966 - - - 4,000 Issue of new shares in relation to exercise of employee share options 3 35 - - - 38 Credit to equity for share-based payments - - - - 135 135 Transactions with owners 37 4,001 - - 135 4,173 At 30 June 2023 (unaudited) 349 15,152 5,864 (71) (20,296) 998 Loss for the period - - - - (197) (197) Other comprehensive income/(loss) Exchange differences on translation of foreign operations - - (251) - - (251) Fair value movements on equity investments - - - - 107 107 Total comprehensive income/(loss) for the period - - (251) - 90 (341) Transactions with owners Issue of new shares in relation to exercise of employee share options 1 17 - - - 18 Credit to equity for share-based payments - - - - 25 25 Post-combination remuneration - - - - 309 309 Issue of warrants - - - - 274 274 Transactions with owners 1 17 - - 608 626 At 31 December 2023 (audited) 350 15,169 5,613 (71) (19,778) 1,283 Loss for the period - - - - (1,120) (1,120) Other comprehensive loss Exchange differences on translation of foreign operations - - (165) - - (165) Total comprehensive loss for the period - - (165) - (1,120) (1,285) Transactions with owners Issue of new shares in relation to equity fundraising 65 2,559 - - - 2,624 Transaction costs relating to issue of share capital - (446) - - - (446) Issue of new shares in relation to exercise of employee share options 2 55 - - - 57 Credit to equity for share-based payments - - - - 311 311 Transactions with owners 67 2,168 - - 311 2,546 At 30 June 2024 (unaudited) 417 17,337 5,448 (71) (20,587) 2,544   Consolidated statement of cash flows For the 6 months ended 30 June 2024     6 months to 30 June 2024 6 months to 30 June 2023 Year to 31 December  2023   Unaudited Unaudited Audited   Note  £'000  £'000  £'000 Net cash flows used in operating activities 9 (1,583) (3,499) (4,967) Investing activities   Acquisition of subsidiary, net of cash acquired - (3,002) (3,002) Interest received 12 6 16 Purchase of property, plant and equipment - (31) (33) Net cash flow generated from/(used in) investing activities 12 (3,027) (3,019) Financing activities   Proceeds from share issue 2,624 - - Transaction costs arising on issue of shares (446) - - Proceeds from borrowings, net of fees incurred - - 3,054 Proceeds from exercise of share options 57 38 56 Repayment of borrowings (131) - (116) Interest payments (303) - (109) Net cash flows generated from financing activities 1,801 38 2,885 Net increase/(decrease) in cash and cash equivalents 230 (6,488) (5,101) Cash and cash equivalents at start of period 3,222 8,322 8,322 Exchange differences on cash and cash equivalents (18) 57 1 Cash and cash equivalents at end of period 3,434 1,891 3,222   NOTES TO THE INTERIM FINANCIAL STATEMENTS   1. General information Cambridge Cognition Holdings plc ('the Company') and its subsidiaries (together, 'the Group') develops and markets digital solutions to assess brain healt h for sale worldwide, principally in the UK, the US and Europe.   The Company is a public limited company listed on the AIM market of the London Stock Exchange (symbol: COG) and is incorporated and domiciled in the UK. The address of its registered office is Tunbridge Court, Tunbridge Lane, Bottisham, Cambridge, CB25 9TU.   The condensed consolidated interim financial statements were approved by the Board of Directors for issue on 21 August 2024. The condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.   Statutory accounts of the Group for the year ended 31 December 2023 were approved by the Board of Directors on 31 May 2024 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.   The condensed consolidated interim financial statements together with the comparative information for the six months ended 30 June 2023 have not been audited.     2. Accounting policies   2.1 Basis of preparation As explained in note 2.1 of the Group's 2023 Annual Report, the Group made the following changes in presentation of the Consolidated Statement of Comprehensive Income and Consolidated Statement of Financial Position, which have resulted in restatements of prior period balances:   ·     Consolidated Statement of Comprehensive Income: the Group previously combined Research and development expense, Sales and marketing expense and Administrative expense into Administrative expense (excluding non-recurring items). These have been separately presented to better present the nature of the expenditure. The overall operating loss for the period ended 30 June 2023 remains unchanged. ·    Consolidated Statement of Financial Position: the Group previously combined Goodwill and Other intangible assets within Intangible assets. These have been separately presented due to their materiality. The overall total and net asset balance at 30 June 2023 remain unchanged.     2.2 Going concern The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, support the conclusion that there is a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future, a period of not less than twelve months from the date of this report.  The Directors believe that the Group will remain a going concern for the foreseeable future. The Group therefore continues to adopt the going concern basis in preparing its condensed consolidated interim financial statements.     2.3 Accounting policies The accounting policies adopted in the preparation of the condensed consolidated interim financial statements are consistent with those followed in the preparation of the Group's consolidated financial statements for the year ended 31 December 2023.     3. Critical accounting judgements and key sources of estimation uncertainty There have been no changes to the Group's significant judgements and estimates since the year ended 31 December 2023.     4. Segmental information The analysis of revenue by product type is as follows:   6 months to 30 June 2024 6 months to 30 June 2023 Year to 31 December 2023 Unaudited Unaudited Audited £'000 £'000 £'000 Software 2,693 2,872 6,532 Services 2,781 2,891 6,364 Hardware 129 276 619 5,603 6,039 13,515     5. Non-recurring items 6 months to 30 June 2024 6 months to 30 June 2023 Year to 31 December 2023 Unaudited Unaudited Audited £'000 £'000 £'000 Acquisition and integration of Clinpal (28) 214 570 Acquisition and integration of Winterlight 68 459 662 Restructuring 103 267 224 143 940 1,456   Non-recurring items are included on the consolidated income statement within administrative expenses.   Acquisition and integration of Clinpal The Group acquired Clinpal in October 2022, as detailed in note 15.1 of the Group's 2023 Annual Report. As a result of the departure of a member of the Clinpal team in 2024 the Group reversed the related charge for retention payments. The Group will continue to accrue for retention payment amounts for the relevant members of staff who remain with the business until 31 December 2024.   Acquisition and integration of Winterlight The Group acquired Winterlight Labs Inc in January 2023, as detailed in note 15.2 of the Group's 2023 Annual Report. Costs in the six months to 30 June 2024 relate to retention awards for key staff. This expense is anticipated to continue until July 2024.   Restructuring The Group completed a significant, multi-department restructuring exercise in the six months to 30 June 2024. No further expense is anticipated in relation to this exercise.     6. Loss per share Calculation of loss per share is based on the following loss and numbers of shares:     6 months to 30 June 2024 6 months to 30 June 2023 Year to 31 December 2023   Unaudited Unaudited Audited    £'000  £'000  £'000 Loss attributable to owners of the Company for the purposes of:   Basic and diluted loss per share (1,120) (3,311) (3,508)     6 months to 30 June 2024 6 months to 30 June 2023 Year to 31 December 2023 Unaudited Unaudited Audited   '000 '000 '000 Weighted average number of shares for the purposes of:   Basic and diluted loss per share 35,342 34,347 34,586   The diluted loss per share is considered to be the same as the basic loss per share. Potential dilutive shares are not treated as dilutive where they could result in an increased loss per share.     6 months to 30 June 2024 6 months to 30 June 2023 Year to 31 December 2023 Unaudited Unaudited Audited   Pence Pence Pence Loss per share   Basic and diluted loss per share (3.2) (9.6) (10.1)   See note 8 for details of the total number of shares in issue.   7. Goodwill and Other intangible assets     Acquisition related intangible assets       Goodwill Technology based assets Marketing based assets Customer based assets Licences Total   £'000 £'000 £'000 £'000 £'000 £'000 Cost At 1 January 2023 (audited) 482 955 - - 40 1,477 Acquired in business combinations 3,314 3,055 520 308 - 7,197 Exchange adjustment (114) (105) (18) (11) - (248) At 30 June 2023 (unaudited) 3,682 3,905 502 297 40 8,426 Exchange adjustment (29) (26) (4) (3) - (62) At 31 December 2023 (audited) 3,653 3,879 498 294 40 8,364 Exchange adjustment (78) (73) (13) (7) - (171) At 30 June 2024 (unaudited) 3,575 3,806 485 287 40 8,193 Amortisation and impairment At 1 January 2023 (audited) - 32 - - 24 56 Amortisation charge - 249 17 16 3 285 Exchange adjustment - - - - - - At 30 June 2023 (unaudited) - 281 17 16 27 341 Amortisation charge - 247 16 16 4 283 Exchange adjustment - (1) - (1) - (2) At 31 December 2023 (audited) - 527 33 31 31 622 Amortisation charge - 245 16 15 3 279 Exchange adjustment - (9) (1) - - (10) At 30 June 2024 (unaudited) - 763 48 46 34 891 Net book value At 1 January 2023 (audited) 482 923 - - 16 1,421 At 30 June 2023 (unaudited) 3,682 3,624 485 282 13 8,086 At 31 December 2023 (audited) 3,653 3,352 465 263 9 7,742 At 30 June 2024 (unaudited) 3,575 3,043 437 241 6 7,302     8. Share capital   Number £'000 At 1 January 2023 (audited) 31,170,093 312 Issue of new shares for the acquisition of Winterlight Labs Inc 3,445,595 34 Exercise of share options 237,145 3 At 30 June 2023 (unaudited) 34,852,833 349 Exercise of share options 107,276 1 At 31 December 2023 (audited) 34,960,109 350 Issue of new shares in relation to exercise of employee share options 189,263 2 Issue of new shares in relation to equity fundraising 6,561,057 65 At 30 June 2024 (unaudited) 41,710,429 417   All ordinary shares are issued and fully paid and carry equal voting and distribution rights. There are no other classes of shares.   During the six months to 30 June 2024, the Company issued 189,263 (6 months to 30 June 2023: 237,145) ordinary shares of 1 pence each with a nominal value of £1,893 (6 months to 30 June 2023: £2,371) pursuant to the exercise of shares options.   On 18 and 19 June 2024, the Company issued 6,561,057 ordinary shares of 1 pence each with a nominal value of £65,611 as part of an equity fundraise. Directly associated transaction fees of £446,000 were incurred which have been offset against share premium.     9. Reconciliation of operating result to operating cash flows     6 months to 30 June 2024 6 months to 30 June 2023 Year to 31 December 2023 Unaudited Unaudited Audited    £'000  £'000  £'000 Loss before tax (1,130) (3,417) (3,457) Adjustments for:   Depreciation of property, plant and equipment 40 46 97 Impairment of property, plant and equipment - 3 3 Amortisation of intangible assets 279 285 568 Share-based payments charge 311 135 160 Finance costs 303 - 168 Acquisition related expenses deferred amounts - 202 318 Interest receivable (12) (6) (16) Research and Development expenditure tax credit (13) - (73) Operating cash flows before movements in working capital (222) (2,752) (2,232) (Increase)/decrease in inventories - (28) 29 Decrease/(increase) in trade and other receivables (230) 1,242 2,235 Decrease/(increase) in trade and other payables (13) 3 (445) Decrease in deferred income from contracts with customers (1,199) (1,963) (4,667) Cash used in operations before tax (1,664) (3,498) (5,080) Taxation credit/(expense) less tax paid 81 (1) 113 Net cash flows used in operations (1,583) (3,499) (4,967)   The share-based payment charge has increased to £311,000 in the six months to 30 June 2024 (six months to 30 June 2023: £135,000) due to the extension of the life of historic vested options in order to align to the Group's standard 10-year option life. This resulted in a one-off charge of £226,000.     10. Copies of interim financial statements Copies of the interim financial statements are available from the Company at its registered office at Tunbridge Court, Tunbridge Lane, Bottisham, Cambridge, CB25 9TU. The interim financial information document will also be available on the Company's website www.cambridgecognition.com .

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